How to Pay Off Your Car Loan in 12 Months

Car ownership is a costly endeavor. You have to factor in a down payment, interest, monthly payments, insurance premiums. Not to mention, any additional maintenance or repairs that pop up throughout the years. By the time you average it all out, the cost of car ownership is well beyond what you could ever imagine. Yet Americans owe more than 1.2 trillion on auto loans, with over 85% of all new car purchases being financed. The obvious choice would be to avoid debt altogether, but for the majority of drivers, the only real way to get behind the wheel of a car is to put yourself in debt. Therefore, some drivers could be looking for ways to pay off your car loan immediately.

Check out these insightful tips on how to pay off your car loan effectively within in 12 month timespan.

Set a low budget, no matter how much you can afford

If you consider a vehicle as a means of transportation and not a beloved possession, then this tip is for you. Don’t overthink what make or model you should invest. Perhaps find a model that checks all your boxes and retails at a lower price point. Once you get pre-approved, it doesn’t mean you have to search for a model in that price range. Stick to the lower end of your budget and choose a vehicle that falls well below your preapproval limit. That way you can take every step possible to pay off your loan within that one year period.

Even if you find this timeline too aggressive, the idea of financing a vehicle that is below your preapproval rate will help work to your advantage. Basically, you’ll be able to knock off any debt sooner rather than later. With that said, there are some vehicles that offer you that capability more easily. Some of our favorite low-cost models include the Nissan Versa, Kia Forte, Mitsubishi Mirage, and Subaru Impreza. If you’re really ballin’ on a budget and  looking to pay off your auto loan within a 12 month span, consider browsing our list of the best models under $5,000 as well.

Make a big down payment

Naturally when the times comes to invest in a new vehicle, the last thing you want to do is get in over your head. It’s best advised to save up sufficient funds for your down payment prior to making a deal in general. That said, you’ll want to put down at least 20% when securing a new car loan. Essentially, the more money you cough up from the start, the less interest you’ll pay over the course of 12 months or more. Although saving money in 2022 isn’t a walk in the park, we do encourage all drivers to do some research before signing the dotted line. Check in with your financial health before getting too overwhelmed by the bells and whistles of a new purchase.

Want to pay off your car loan quickly? Transfer your loan balance

Instead of enduring the full interest of your auto loan, consider transferring a portion of that balance to a credit card. Specifically one with 0% APR. This method will help you to pay off your auto loan quicker. In addition, help you to avoid the mounting interest on your current debt. However, our best recommendation (if applicable) is to pay above your monthly payment. For example, if your car loan is $599 per month and you can spare an extra $200 ever-so-often, don’t hesitate to throw the added money into the mix. You could likely knock off more of your principal.

Develop a strategy to pay off your car loan and stick with it

That feeling of paying off ALL MY DEBT.
Credit cards✅
Personal loan✅
Auto loan✅

ALL. OF. IT.

— Zach Goodman (@z__good) January 18, 2022

The thought of living debt-free eases the minds of every American. In all honestly though, most drivers won’t have the means or intention to pay off a car loan in just 12 months. That said, this ambitious strategy is not unattainable. If you strategize before investing, you could find a make or model that satisfies your checklist without obtaining a long-term auto loan.

We hope these tips and insights help all drivers navigate their next auto loan! Who knows, if you find the right strategy, you might be lucky enough to pay off your car loan in less than a year.